Impact of Demographic Trends to Indian Economy: an Excerpt

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Impact of Demographic Trends to Indian Economy: An Excerpt

India has made incredible progress with its economy ever since its independence, whereby after the economic tsunami in 2009, it has been frequently quoted as a likely contender of economic superpower even to the extent of overtaking China. This paper serves to understand the importance of demographic trends of India in shaping Indian economy, as well as the part that the unique caste system and religion have to play in the whole picture. Ultimately, the 2020 scenario on the above aspects will be visualized, with opportunities and risks highlighted.

If one reason were to be quoted as key driver of India’s economy now, it would be demography. India’s population has been undergoing rapid growth since independence in 1947, and now is entering a highly positive stage known as the demographic bulge, which is one of the key ingredients needed of highly successful countries. According to the Population Research Centre in the Institute of Economic Growth in New Delhi in 2001, India’s population stood at about 350 million at the time of independence in 1947. Belying Malthusian fears, it grew at an unprecedented rate to reach the one billion mark at the dawn of the new millennium. The Census of 2001 has put the population figure provisionally at 1,027 million, even though it registered a significant reduction in the growth rate of population. During the latter half of the twentieth century, India’s population had grown by nearly 650 million. Also, as quoted from the Indian Government’s Planning Commission in 2002, India is in the process of a demographic transition from high fertility, high mortality and stable population to low fertility, low mortality and stable population. This transition is a global phenomenon generated by the improved availability and access to modern health care that sharply reduced mortality rates and increased life expectancy (Chart 1). The crude death rate has declined to one-third of its level in 1941 and the expectation of life at birth has nearly doubled during this period. Falling mortality rates have been followed by a steady decline in birth rates, but this decline has not been as steep as the fall in death rate; even after reaching the replacement fertility rates, the population will continue to grow because of large numbers of young persons entering reproductive age. All in all, the demographic indicators had demonstrated some careful planning by the Indian government of controlled population increases with lower birth rates and death rates, managed fertility rates, as well as longer life expectancy at birth throughout the half-century before for last census done in 2001 as depicted in Chart 2. With effective population policies in place, it is foreseen that India’s total population will grow at quick pace (Chart 3): Today India is the second most populous country in the world, with about 1.04 billion people, home to a sixth of humanity. Although it is difficult to accurately predict population growth rates 20 years to the future, we expect this number to rise by another 300-350 million, in spite of continuous efforts to reduce fertility rates. This would raise the total population to about 1,330 million by 2020. But the best news for India is yet to come:

Based on achieving the demographic goals of the National Population Policy 2000, life expectancy is assumed to rise to 71 for males and 74 for females by 2020. Under the realistic scenario, life expectancy is assumed to reach 65 for males and 69 for females by 2020. … India’s population would exceed 1.3 billion in the year 2020. … In both cases the sex ratio of population (females per 1000 males) would marginally increase from 932 in 2000 to 950 in 2020; reversing the historical trend of falling sex ratio is expected in the 21st century. … Actually, the population under-15 years is expected to increase only marginally over the next 20...
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